Understanding the Outrage in Ukraine

Tens of thousands of people have taken to the streets in Ukraine and toppled a statue of Vladimir Lenin as they protest the government’s decision to suspend talks with the European Union. Sophia Opatska, CEO of the Lviv Business School, explains how the people of Ukraine have become disenchanted with the ruling political party and how they are taking action.

The massive protests in Ukraine didn’t come from out of the blue. They stem from deep-seated economic and social imbalances, with protesters hoping to influence the country’s socioeconomic situation for the better.

In the last couple of years, Ukraine has been in a recession. Although the current government outlined plans to make improvements and reforms, only a small number of people close to the president’s family has experienced any benefits. According to journalistic investigations, the president’s extended family and unofficial entourage have appropriated more than $6.5 billion in the last couple of years.

When it comes to corruption, Ukraine ranks 144 out of 177 countries, tying with Nigeria, Iran and the Central African Republic.

Meanwhile, small- and medium-sized businesses have constantly felt intense pressure from tax departments, while reports have surfaced about corruption in state administrations and the courts. The country suffers from low levels of investment, a small number of new business projects and an out-of-date economic structure.

The global community has taken note of the current state of affairs, with Transparency International rating Ukraine as the worst performer in Europe. When it comes to corruption, the country ranks 144 out of 177 countries, tying with Nigeria, Iran and the Central African Republic. According to the latest Gallup research, 21% of Ukrainians would like to leave the country to improve their standard of living.

A U-turn by the Government

The message from the Ukrainian government over the last three years, specifically over the last six months, was that Ukraine was about to sign an agreement with the European Union and oppose the Customs Union suggested by Russia. But then, in late November, the president of Ukraine, Viktor Yanukovych, announced he was suspending the European integration process. He claimed that Ukraine would need up to €160 billion ($219 billion) to re-orient Ukraine to European markets. As a point of comparison, Poland received €2.8 billion in financial assistance during the first two years of its EU membership, according to a report from the Center for Social and Economic Research.

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According to calculations by my colleague, Yaroslav Prytula, a professor of economics, the government is plainly overestimating its potential losses. The EU agreement was expected to lead to the loss of roughly 400,000 Ukrainian jobs, and compensation for this loss should be roughly €9.2 billion ($12.6 billion). If we assume that all of these jobs were in the high-tech sector, the amount would be as high as €82 billion, a far cry from €160 billion.

Ultimately, the president’s explanation about his political and economic U-turn sounds remarkably hollow, especially to the younger generation of Ukrainians who gravitate to European values, economics, politics and lifestyle choices.

At the same time, the system of social justice in Ukraine is in tatters. On the night of November 30, Ukrainian authorities used brutal violence against a group of students and young people who had been peacefully demonstrating against the government’s U-turn decision. This shows how Ukrainians’ personal security is not assured and citizens can easily be humiliated by the authorities. During the last 22 years of Ukrainian independence, there have been many political games, agreements and trade-offs between parties and politicians, but these social boundaries were not crossed.

On November 30, Ukrainians woke up in a new country. Social media and smartphones allowed us to see the cruelty and violence perpetrated by the authorities, and civil society reacted immediately, with nearly half a million people staging a peaceful demonstration in Kiev the next day. This enormous support came as a surprise to the authorities and opposition leaders.

The cynicism and moral impotence of the government were demonstrated as leaders remained silent at first and then called the student demonstrators “provocateurs,” even though pictures and videos from the event tell a different story. Rather than facing the crisis and negotiating with the demonstrators, President Yanukovych left the country to negotiate with China.

It may be surprising to outsiders to see that Ukrainian businesses are supporting the protestors.

Business Reaction

It may be surprising to outsiders to see that Ukrainian businesses are supporting the protestors. A recent Globe and Mail article outlined that some companies are arranging flexible work schedules to allow people to attend rallies. The Ukrainian middle class, which is a relatively small group, has been providing resources to the protestors — financial, material and intellectual. There are a number of key factors that have led to this support:

Over the last several years, the Ukrainian business environment has lacked any sort of fair competition. Close relations to the local, regional and national administrations gave businesses a competitive advantage, outweighing the benefits of having smart employees, creative ideas or highly efficient processes. The absence of clear and fair rules of play contributed to shrinking the Ukrainian business landscape.

Meanwhile, businesses have become increasingly upset about paying high taxes for civil servants who are not held accountable for their actions. Specifically, the ruling political party that has a majority in the Parliament – the Party of Regions — refused to bring to justice the people who were responsible for the bloody atrocities on November 30. There is now a huge movement to boycott brands and companies that are owned by representatives in the Party of Regions. In fact, Sergey Petrenko, the CEO at Yandex Ukraine — a popular search engine company — made a statement on his blog calling on people to ignore events that will be attended by representatives from the Party of Regions.

The middle class and businesses are also turning on the government because they believe it did not fulfill its official obligations and has proven to be an unreliable partner.

The movement to protect links to the European Union has turned into a movement to protect the right to self-esteem and human dignity.

In this environment, traditional Western-style rules of the game are insufficient. The country and businesses cannot thrive in the 21st century as they try to operate under rules and principles from the 19th century. The people are much more ahead of the times than their official leaders. Ukrainian citizens and businesses require real change in society, and the current movement can be a starting point.

Change Is in the Air

The last several days have been filled with new entrepreneurial initiatives. A new independent online media venture – a joint project between famous Ukrainian journalists called Hromadske TV – has sky-rocketed in popularity and now competes with official TV channels. Constructive social movements are being organized, and reform plans are being drafted for the first 100 days of the new government.

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